Shipping Firms are Big Losers in Airline War

Philippine Daily Inquirer
Friday, December 25, 1998

By ARMAND NOCUM

THE BATTLE for air supremacy has seriously hurt the shipping industry, because passengers who used to regularly take inter-island ferries are now opting for low-fare airlines, according to a Philippine Airlines official.

While saying this, PAL Vice President Avelino Zapanta however added that the aggressive campaigns of the other domestic airlines had not hurt the flag-carrier.

He gave assurance that PAL continued to command more than 50 percent of the market, though he admitted the company's share had been 60 percent before the crippling strike of employees and before PAL dropped its missionary routes.

"We did not lose our market share,” Zapanta, Vice President for Sales and Services, told the INQUIRER in a telephone interview. “They only created a new market with their low fares."

He said the decision of new players Air Philippines and Cebu Pacific to break into the market by offering low fares had resulted in converting "boat people" to "air people."

He said this trend started in 1995.

"It's the shipping lines that are absorbing the (airline) competition," he said.

At one time, he noted, a competitor even offered a P999-fare for the Manila-Cebu route, which was lower than a first-class ticket in a local shipping line.

"We have our niche," he said.

Zapanta said that PAL's decision to set fares at least P100-P200 higher than those of their competitors had even been able to attract the air-travel converts.

Because of this, he said, PAL was grateful to its competitors for creating a new market, a portion of which had now spilled over into PAL.

He brushed aside claims by Cebu Pacific President Lance Gokongwei that his company had wrested away 35 percent of PAL's market share.

William Gatchalian of Air Philippines has made the same pronouncements.

Apart from the two airlines, other new players are Asian Spirit, Grand Air and Mindanao Express.

"We are still the dominant player," Zapanta said of PAL, which is fettered by a $2-billion debt and pressure from creditors to shape up.

"We have some hurdles. But we are hopeful that these issues will be settled by the end of January," Zapanta said.

PAL's European creditors have recently rejected the company's proposed rehabilitation plan.